The LVCR loophole has benefited many large companies by allowing them to move offshore and avoid VAT on goods, such as DVDs, CDs and printer cartridges, valued at up to £18.

Its closure would signal an end to the Channel Islands' lucrative online mail order business, known as the fulfilment industry, along with 1,000 jobs.

States of Guernsey deputy Barry Brehaut said: “Guernsey has a reputation for being a well regulated ‘white listed’ financial centre, more recently however, in attempts to diversify the nature of the economy, we have moved into areas that have ultimately led to our UK counterparts - not unreasonably – to become more politically inquisitive."

“Guernsey has a unique relationship with the UK and a great deal of shared history, however there is the sense that Guernsey is becoming increasingly tolerated, rather than accepted.

“The fulfilment ‘loophole’ has had a real impact on small businesses in the UK, they simply cannot compete with the multinationals exploiting a provision that was initially in place, ironically, to assist with exports from the growing flowers and plants industry.”

Deputy Brehault has long been a supporter of the Forum of Private Business, the non-profit group that supports small UK business interests and campaigns for the closure of the LVCR loophole.

Conservative Lord Ralph Lucas recently intervened on the group's behalf in the House of Lords, where he won cross-party support for the VAT loophole's closure. Commercial secretary to the Treasury Lord Sassoon subsequently announced the issue would be addressed in the forthcoming Budget.

Deputy Brehault continued: “More than ever before there is a sense that the Government will move to close the ‘loophole’ that it conservatively estimates costs £150 million in lost revenue, a figure that is growing.

“No doubt there will be implications for the local postal service and the consumer, however it was always thus. Our commerce and employment department have embraced fulfilment with a fixed short-term view.

"Guernsey must re-establish a close mutually respectful relationship with the UK and look at alternative sustainable models to underpin our economy rather than the more transient enterprises that will ultimately only lead to conflict with the national government and have untold reputational issues.”

A spokesman for Guernsey's Commerce and Employment Department said: "The LVCR arrangements are a UK Government matter. The States of Guernsey Policy Council and Commerce and Employment Department have worked hard with HM TreasuryandHM Revenue and Customs to alleviate concerns that have arisen through the use of the LVCR arrangements. The Commerce and Employment Department will continue to monitor the situation and will remain in close contact with HM Treasury."